Cheque Fraud

With cheques still a popular method of payment; cheque fraud remains an equally popular source of illegal activity for criminals, through which they gain financial advantage from unsuspecting individuals, especially businesses.

There are various fraud scams that are committed with cheques such as cheque interceptions, the substitution of genuinely issued cheques with fraudulent ones, and cheque washing.

Whilst cheque fraud criminals are generally targeting business clients of the banks, any person can fall victim to this crime.

Look out for:

  • Check the payee, amount in words and figures carefully for alterations.
  • Be on the lookout for stamps that are placed over areas that could conceal alterations.
  • Cheques issued in black Koki pens should raise suspicion.
  • Spelling mistakes on the printed areas of the cheques such as the drawer’s details and the Bank Branch name.
  • Tampering on the MICR Code line – black shaded areas.
  • Be suspicious if the cheque appears faded, as chemicals could have been used to remove information.
  • Typed cheques.
  • Shaky signatures could indicate that the signature was traced.
  • Treat typed or pre-issued cheques with caution.

Cheque fraud:

There are a number of things that you can do to protect yourself against cheque fraud.

  • Write your cheque in such a way that it is difficult to alter.
  • Write clearly and neatly using a non-erasable ballpoint pen. The type of pen you use makes a difference. Most ballpoint and marker inks are dye based, meaning that the pigments are dissolved in the ink. But, based on ink security studies, gel pens, like the Uniball 207 uses gel ink that contains tiny particles of colour that are trapped into the paper, making cheque washing a lot more difficult.
  • Write the full names of the payee and spell them correctly. Avoid the use of abbreviations.
  • Do not make any corrections to the cheque as alterations in any form will not be allowed on the cheque except for where the words “bearer/order” has been ruled through. It is best to cancel it and write out another one.
  • Don’t leave large spaces between words and draw a line through any unused space to ensure that nothing can be added to the cheque.
  • Write the amount of the cheque in the space immediately after ‘The sum of’. According to the Bill of Exchange Act the amount in words will be considered the correct amount if there is a difference between the amount in words and figures.
  • Write the amount in figures as close to the ‘R’ as possible.
  • Fill in the correct date.
  • Remember to sign your cheque.

What else can you do to keep your cheques safe?

  • Keep your chequebook, cancelled cheques and statements safe.
  • Never sign a blank cheque.
  • Report lost or stolen cheques immediately.
  • Provide your Bank with up-to-date signatures of everyone who is entitled to sign cheques on your account.
  • Check your statements every month and do reconciliation.
  • It is safest to collect your new chequebook yourself.

The way you make your cheque payable can protect you:

  • A ‘cash’ cheque is as good as money so it is not your safest option.
  • Cheques where the words ‘Or Bearer’ are not crossed out are as good as cash and can be cashed by anyone who presents it (even if it was made out to a person or company). If you do not want the cheque to be negotiated between various parties you can restrict negotiation by adding the words “Not Transferable”. This in effect means that the cheque may only be negotiated by the person/company whose name appears on the beneficiary field.
  • When a cheque is made out to a person or company and ‘Or Bearer’ is crossed out, it is safer. However, the original payee can still sign the back of the cheque and make it over to a third party.

How does crossing your cheque protect you?

  • Two lines with or without the words ‘non-negotiable’ or ‘non-transferable’ written between them means the cheque cannot be cashed but has to be deposited into a bank account.
  • A crossing cannot be cancelled.
  • ‘Non-transferable’ means it must be paid into the account of the person or company whose name appears on the cheque.
  • ‘Non-negotiable’ means it must be paid into a bank account but the person to whom the cheque was originally made out to may transfer it to a third party.
  • According to the Bill of Exchange Act section 81(3) the words “Not Negotiable” give the drawer/issuer more protection with regard to obtaining information relating to the deposit of such cheque.
  • It is not advisable posting a cheque.
  • If you must send it via post make sure cheques are crossed, marked non-transferable’ and made payable to a specific person or company.
  • Send cheques by registered mail and in good time to allow for delivery delays.
  • Staples or paperclips attaching a cheque to a letter are all tell-tale signs for criminals.
  • Avoid envelopes that are transparent or easy to open.

When accepting a cheque make sure that:

  • It has not been altered.
  • It isn’t post-dated.
  • It is signed.
  • There are no dirty marks on it.
  • The same pen has been used throughout.
  • The handwriting is the same on all parts of the cheque.

Be cautious when you notice the following on a cheque:

  • Several stamps that are placed over areas that could conceal alterations.
  • Black Koki used to complete the cheque.
  • Spelling mistakes on the printed areas such as the drawer’s details and the Bank Branch name
  • Tampering on the MICR Code line – black shaded areas.
  • Faded areas, as chemicals could have been used to remove information.
  • Shaky signatures which could indicate that the signature was traced.
  • Typed or pre-issued cheques.

Important Notes

  • When accepting a bank-guaranteed or bank-issued cheque, remember that the issuer might give you this cheque, wait for you to release the goods and then quickly cancel the cheque for a false reason.
  • When accepting a cheque don’t release goods until the funds have been paid into your account or request a special clearance from the bank on the cheque deposit in question.